The quote above comes from Robert Bennett (Senate, R-Utah) and while no doubt narrowly true (presumably it’s Wachovia), implying that the bank will go under due to the failure to implement the Paulson plan is just plain dishonest. The bank has been wobbly for a very long time and t isn’t at all clear that the plan, even if it had been voted in last week, would be implemented in time to have any impact or would have done anything other than delay the inevitable.
But that isn’t the only misrepresentation Bennett made…
From CBS News:
Sen. Robert Bennett (R-Utah), a key member of the Senate Banking Committee, warned Saturday that another major U.S. bank was “teetering” on the edge of failure and would go under if the bailout deal doesn’t come through soon.
Bennett would not name the bank, perhaps learning the lesson from a situation last month when Sen. Charles Schumer (D-N.Y.), warned that California-based IndyMac could not cover its deposits, and there was a run on that bank by customers.
Bennett was essentially trying to warn the congressional holdouts on the bailout legislation that the situation was so dire that more U.S. banks would fail as soon as Monday or Tuesday, and he seemed to have knowledge, as a member of the Banking Committee, of another major financial institution in trouble.
“What will they say come Monday if another major bank fails _ I will not use the name,” Bennett said. “There’s another major bank teetering on the edge.”
Bennett has been in on some of the key negotiations on the bailout, and appears to have been briefed on some of the severe consequences if Congress fails to act on the bailout legislation.
“If everyone understands how dire the situation is, that will concentrate the mind,” Bennett said. “There will be no more commercial paper.”
The other dishonest bit is linking the bailout bill to the commercial paper market. As we noted in another post today, that market continues to be under extreme stress. Why? Because the Treasury has done zero, zip, nada to move forward on its promise to backstop money market funds.
I am not making this up. Check the Treasury website. There was an announcement with a general outline of a plan September 21, with a promise of more detail in “coming days”. Nothing further has been done. Statements of intent don’t get you very far in times like these.
The implosion in the CP market, which is truly dangerous, is completely the result of the Treasury dropping the ball. Is this a bug or a feature? If the Treasury is trying to keep panic up so it can get the bailout bill passed, that is simply heinous. But the lesser charge, that they have neglected this task by virtue of being distracted, is criminal neglect. Take your pick.